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    Published on: January 20, 2004

    We got a number of emails regarding yesterday's story about a piece in The New York Times about a new labor controversy for Wal-Mart, this one about its past policy of keeping overnight workers locked inside its stores. The policy supposedly was to keep the store and employees safe in dicey neighborhoods, though some employees questioned the motivation. The larger concern seemed to be about a policy that kept people from leaving the store except in case of fire, which created some safety questions in other circumstances.

    MNB user David J. Livingston wrote:

    Wal-Mart just gets the bad press because they are big and they are good at what they do. If I'm locked inside a Wal-Mart at 3 am and need an ambulance -- well I'm going out the emergency door. So what if you loose your $6 an hour job? Big loss?

    We suppose it is a big loss for people who may not have a lot of other options.

    MNB user Tim Yount chimed in:

    I've been in this retail working world for 30 years, now, so I feel qualified to speak on the latest round of Wal-Mart news. I feel what we are seeing out there in Bentonville reaction to all the incidents reported, is a classic picture of "practice" versus "policy".

    No good retail corporation, in their right mind, is going to tell their managers to lock people in their workplace. That would be shades of slavery or imprisonment (to be harsh). However, and I've witnessed this many times in my retail operational career, there may be the spoken word, from higher authorities, that "inform" local management of "practices" to get things done in an efficient manner. These "practices" will never find their way into print, because they are "suggestions". Enterprising store management may adopt them to be the corporate will, but they have been cleverly disguised as mere suggestions for a better way of doing things.

    Kevin, whether in grocery store operations or in general merchandise operations, these things happen all the time. It certainly doesn't make them right, and it gives a corporate entity the status of "plausible deniability".

    Does that happen in Wal-Mart culture? I believe we've seen enough to know that there is something going on. Does it come from the core of Wal-Mart's cultural soul? Maybe not in writing, but the mantra of "low cost operator" may have a life of its own within the operating practices that emanate from Bentonville. Nothing in writing, of course.


    We're not sure what is really known about Wal-Mart's soul. There's anecdotal evidence and a lot of different perspectives. But the soul can be a difficult thing to read.

    And another member of the MNB community wrote:

    I cannot understand, for the life of me, why anyone would think that after a store closes for the day it should remain with unlocked doors. There are smoking areas in the store; there are fire doors all over the store that open at a touch; what else does one need?

    While it may take a few minutes to answer a phone, although there was someone whose duty was to do that on the night crew where I worked; it won't be on the first, fifth, or even maybe, the 20th ring. But, in my experience, it will be answered. Someone is always curious enough to find out who's calling at 3 am; even thou 99% of the messages are "Are you open?".

    If anyone had to wait an hour for a manager to come on an accident scene, either there was no urgency in the message paging them or, again, they were one of the rogue managers who got caught out of the store after sneaking out for a smoke or cup of coffee and "hot KK" at the nearby Krispy Kreme. Neither explanation makes any more sense than the NYT again blowing ordinary happenings out of proportion. I can't recall anything like this being reported in the past 10 years I've been at Wal-Mart.

    As for those assistant managers claiming Wal-Mart "forced them to do work that was decidedly non-managerial", that's in their view. Those associates working for these three might be heard saying that they were only doing the type work they were capable of doing. There's a few in every store that fail to measure up to the job they are put into. But that's not hardly new anywhere.

    I dare say that IMO this article measures up to last week's as being as meaningless as it seamed to be. I've sort of grown used to this from the NYT.


    Maybe. But we're not rejecting all the negative news coverage just because it’s the news and just because it's negative…even though that seems like what Wal-Mart would like us to do.




    We got the following email about the Southern California grocery strike:

    One of your posters wrote:

    "As a woman, I cannot help but wonder where people are shopping and what is happening to the bottom line at those stores."

    Here in the San Gabriel Valley we are so saturated with supermarkets, you're never more than a mile away from one. So if you don't feel like confronting the familiar faces of the picketers at your local Vons, drive a couple of blocks to Albertsons or Ralphs, or Stater Bros, or Costco, or... you get the idea. Personally, the strike has motivated me to do more shopping at Superior Grocery Warehouse (1.3 miles away) instead of Vons (2 blocks from home, and another 1 block from work) since the prices are better and the meat is less suspect than the stuff that's being trucked in to the big 3.

    I have asked a number Vons strikers and a couple of UFCW reps what the continually empty parking lots indicated. They all said it meant customers were supporting the strike. I tried to point out that people did not seem to be going hungry, and I had yet to hear of any food riots breaking out, so maybe competition is as fierce as the big 3 have stated. I cited as an example that Superior Grocery has 21 (twenty-one!) registers open on Saturday mornings, and they are for the most part selling the same items as the as the big 3 (i.e., non-bulk sizes) at lower cost. You want to know what the UFCW guys told me? They had never been there! Talk about willful ignorance.

    As to the bottom line - Vons and Albertsons are ghost towns. Ralphs, due to the absence of pickets, are substantially busier.

    Regarding the comment:

    "Isn't it interesting that the small, innovative supermarket chains don't seem to have labor problems, while the large, centralized chains do?"

    Trader Joe's, Superior, and Sam's Club are non-union, so that helps a bunch with the labor issues. Stater Bros. and Gelsons purchased their labor tranquility by choosing the appeasement route with the union (they promised to accept whatever terms the UFCW and big 3 agreed to in exchange for not being struck). Seems the "innovation" consists of either not having a union, or paying protection money.





    Regarding the dispute between the Bush administration and the World Health Organization (WHO) about proposed obesity guidelines, MNB user Ward Eames wrote:

    I think the US Government is right in one respect. There is no "good" or "bad" food. There is "every day" and "Once in a while" food.

    Good point, and well-put.

    MNB user Cathy Watkins wrote:

    Are you kidding me? You certainly can think that there are clear and accepted standards of what is junk food and what is good food! There are various forms of recommendations floating around, however as soon as science determines something, a year or two later another study finds it false...think eggs!




    More comment regarding Kash n' Karry CEO Shelley Broader, who we keep hearing and saying good things about:

    No question your remarks concerning Broader are right on. I've known Shelley for a number of years and she has yet to reach her potential, even in this current role. It's been fun to watch and she's only at the beginning of her curve.




    Regarding Kmart's continued closing of stores, MNB user John Tingley wrote:

    Closing a store here and there is not a problem what Kmart needs to do is find new ways. Distribution is the key stores that can be service by the Distribution Network is key. Maybe Kmart can franchise stores in under stored areas. One other area that Kmart should try is going back to the old 5 & dime. For Years Kmart had deep discount stores ( Jupiter ) when the Kresge stores no longer work.

    Maybe besides up grading current stores ( please either get in or out of electronics') opening small discount $$$ store's where they have excess distribution.

    Kmart started and was most successful when it was a store with several different companies involved.


    And another MNB user wrote:

    More Wal-Mart Supercenters are opening in Saginaw and the Kmart in Michigan was a weak performer. The scary thing is Wal-Mart is targeting some of Kmart's best performing units for opening new stores. I would not be surprised to see Kmart close 200 stores a year until they run out of stores to close. The very best Kmart does about the same volume as the average Wal-Mart. And those numbers are dropping fast, according to Kmart.



    The subject of information control, as proposed by the White House Office of Management and Budget (OMB), prompted several emails. One MNB user wrote:

    Honestly, I think this entire ordeal has become a podium for Bush and his office constituents because of the election year. Many MNB readers have stated, with great accuracy I might add, that this emergency control given to the White House not only threatens the democracy of the country but in the same breath almost violates the Constitution.

    One reader had written that if this bill were to pass that it would take too long for the information to go through the pipeline and the public would be left dumb for what could possibly a dangerous amount of time. I realize that is an extreme, but this idea and what has now happed with the declared "Emergency State" is more extreme. The way this country was founded was not in a way that gave one governing body all the power. This bill does that and words like Aristocracy and Dictatorship come to mind.

    Information is freedom, and so is speech. How would we be able to get all of our good information from MNB if the pipeline of info is cut off.


    Well, we'll find a way…

    And MNB user Denise Remark wrote:

    For all of the readers who responded negatively to this article (& frankly, only an idiot could see any possible good in this thinly-veiled attempt at information control), please suggest that they contact their legislators & tell them how asinine this idea is--I am going to do exactly that! This is an example of how readers send you their comments but should go the extra mile & tell their elected officials how they feel!




    And thanks for the following note, which we received yesterday from a member of the MNB community:

    I read your newsletter first thing --having been in the industry on the sell side for 30 years.

    Your reprint of Dr. King's speech SHOULD have an impact on every American -- but not just for the reasons most might think. Dr. King believed in freedom, not preferential treatment, in equality, not creation of special classes of people (and businesses)through legislation to milk unfair advantage of the rest of the group. Dr. King valued morality and fairness, not corruption and lies (see the endless lies coming from Greg Conger's mouth regarding the So Ca grocery strike...). Dr King dreamed of equality, but equality of individuals, not equality of wealth or the socialistic leveling of every playing field on every plane across society in the US.

    Maybe...just maybe...each reader should take another look at the words in the speech --and then take a moment of introspection to see how misled each of us has been by our government, our society thought leaders, and even our capitalists. It's not too late for us to awaken and make changes the way Dr. King would advocate them being made --at the polls, through economic and non violent protest, through taking a stand when that stand might alienate one from a friend or associate. Maybe everyone should read every word just one more time.
    KC's View:

    Published on: January 20, 2004

    The Wall Street Journal reports that Kimberly-Clark Corp. is reorganizing into developed- and developing-markets divisions, rather than breaking the company into regional divisions.

    The goal is to cut costs and create a structure better able "to sell global brands to diverse geographies."
    KC's View:

    Published on: January 20, 2004


    • Schnuck Markets announced that it will build its first store in Iowa, a 63,000-square-foot store in Bettendorf.


    • Meal solutions pioneer EatZi's, which was sold to an investment company by Brinker International more than a year ago, is ramping up its expansion plans. The company - which currently has stores in Atlanta, Houston, Dallas, and Washington, DC - is focused on another unit in Atlanta, then move to Chicago and many other top-20 markets in the US.

    KC's View:

    Published on: January 20, 2004

    The Food Marketing Institute (FMI), National Grocers Association (NGA), United Fresh Fruit and Vegetable Association (UFFVA), National Cattlemen’s Beef Association, National Pork Producers Council, and National Fisheries Council have announced that they are working together to create a voluntary country-of-origin labeling (COOL) program. The goal is to develop a replacement for the mandatory labeling program that was passed in the 2002 farm bill.
    KC's View:

    Published on: January 20, 2004

    There continues to relentless coverage in the media of the low-carbohydrate diet craze, and the impact it is having on food businesses throughout the country.

    For example, MSNBC reports that companies like General Mills and International Multifoods are suffering because they sell carb-laden products such as cereal, potatoes and pancake mix. Manufacturers like Hormel, on the other hand, that sell low-carb products like Spam and Dinty Moore beef stew, are seeing strong sales increases, as in the nation's egg industry.

    Reuters reports that McDonald's of Canada will begin listing all the calories in the food it sells there, as well as offering a "lighter" menu that includes new salads and grilled chicken entrees for adults, and grilled cheese sandwiches and apple slices with caramel sauce as options for children.

    And the Denver Post reports on how chain restaurants are developing low-carb menus, convenience stores are offering low-carb alternatives, and even manufacturers like Heinz are in the process of creating low-carb condiments.

    Indeed, sales of low-carb foods reached an estimated $1.4 billion in 2003 and some believe could eventually reach $3 billion. But the jury remains out on whether this is short-term hype or long-term lifestyle trend.

    The first-ever low-carb business conference - dubbed "LowCarbiz Summit" - is meeting in Denver this week, attended by manufacturers and retailers alike.
    KC's View:
    What's the over-under on when some major medical study comes out suggesting that the Atkins Diet, South beach Diet, and their brethren lead to a higher incidence of some sort of malady?

    MNB user Paul Schlossberg offered an interesting perspective on this trend:

    It is interesting to see so many companies moving in this direction across so many product categories. This will result in a faster path to prove (or perhaps disprove) the opportunity for low carb products.

    The real issues for manufacturers are whether or not (1) this will be incremental volume or simply converted sales from established products, (2) higher margins (in percentages and in pennies) will be generated. What will the source of volume be for all of these new products? Will new users be attracted to these new products to drive truly incremental consumption?

    It is tricky. Not doing it (launching low carb products) puts a brand at risk of losing share to others who do introduce low carb brands or line extensions. Simply cannibalizing one's own base business is acceptable - but only if margins are not deteriorated. That will be a challenge when considered against the high cost of introducing new products in this rapidly expanding category.

    Of course it still comes down to "tastes good" - because that is what build repeat sales. If the early entrants get lots of trial and don't deliver on good taste, there might not be much in the way of repeat sales. That will hurt the broader category potential.

    Let's not forget shelf space in every retail segment. If so many new items show up - some items will have to fall off the shelves. Keep your eyes on the shelf sets in your neighborhood stores. Planagrams are going to be changing.

    Published on: January 20, 2004

    The Associated Press reports that Wal-Mart is testing "Wal-Mart Money Centers" in 16 stores in north Georgia and east Tennessee, though the banking centers are actually operated by the National Bank of Commerce.

    Wal-Mart spokeswoman Melissa Berryhill calls it a ‘‘co-branded pilot program’’ that combines services offered by its stores — such as payroll check cashing, money transfers and money orders — with traditional banking services.

    The National Bank of Commerce has had banks in Wal-Mart stores for a dozen years, though this is the first time that the Wal-Mart name has been given such prominence. Wal-Mart has made various attempts to get into the banking business, though Berryhill says the company has no further plans in this area. Banking has been attractive to the company because it estimates one out of five Wal-Mart customers don't have checking accounts; the new arrangement is an attempt, according to the company, to get some of those people to start banking with Wal-Mart.
    KC's View:
    World domination takes many forms. This is but one of them.

    Published on: January 20, 2004

    Management at Safeway Plc said yesterday that its shareholders are scheduled to vote February 11 on the company's proposed acquisition by William Morrison Supermarkets.

    The $5.3 billion (US) purchase of the UK's fourth largest supermarket chain by the fifth-ranked food retailer has been the matter of enormous tumult. Morrison launched the takeover bid, which prompted entreaties by Tesco, Wal-Mart's Asda Group, and Sainsbury - and then, after months of consideration, the UK antitrust authorities finally ruled that only Morrison could bid for Safeway.

    If Morrison is successful in its quest to buy Safeway, it will have to divest 53 of Safeway's 479 stores - but will in theory create a much stronger entity with which to compete with Tesco, Asda, and Sainsbury.

    The long process has had an impact on Safeway; it reported yesterday that sales for the quarter ended January 3 dropped 4.1 percent. Analysts say that the decline is not good news for Morrison, which will be faced with having to rebuild those sales.
    KC's View:
    Once the Morrison-Safeway situation gets sorted out, we suspect we'll see the price wars really take off in the UK. There's already all sorts of battling going on in the HBC category, with Tesco and Asda going after Boots.

    The goal of the competition authorities in only letting Morrison acquire Safeway was to make sure there were four, not three, viable entities in the food retailing biz. The decision was designed to create an environment that is good for consumers…and we suspect that the authorities will be proven to be correct in this case.

    Published on: January 20, 2004

    Japanese officials say that following their own investigation into the first discovery of bovine spongiform encephalopathy (BSE), better known as mad cow disease, in the US, they remain unconvinced that the situation has been contained. Japan believes that both US and Canadian cattle remain vulnerable to mad cow outbreaks.

    While both the US and Canada are pushing for Japan to drop its ban on US beef imports, Japan instead is asking the nations to adopt safety procedures similar to those practiced there.

    Japan tests all the 1.3 million cattle it slaughters every year.

    Japanese Agriculture Ministry representative Shukichi Kugita said, “U.S. safety measures compared to those of Japan are inadequate.”
    KC's View:
    While we know this isn’t accurate, it has seemed lately that the US government has been more interested in controlling the flow of information than testing more cattle and providing better traceability.

    As long as this even appears to be the case, we think it will be hard to regain international confidence. After all, once mad cow has been discovered, it isn’t credible to say that the beef supply is safe just because we say it is.

    Published on: January 20, 2004

    The Los Angeles Times this morning reports that the AFL-CIO has decided to intervene in the Southern California supermarket strike, "taking control of national strategy" and looking "to turn around a battle in which employers seem to have gained the upper hand."

    According to the LAT, "the plan is to pressure the supermarket companies by hounding executives and directors with phone calls and visits, staging demonstrations across the country — including a pray-in outside the Northern California home of the chief executive of Safeway Inc. — and persuading major grocery-company shareholders, such as pension funds, to take stands in the union's favor."

    The United Food and Commercial Workers (UFCW) welcomed the AFL-CIO participation.

    The strike/lockout, affecting more than 70,000 employees at Southern California's three major chains - Safeway's Vons, Kroger's Ralphs, and Albertsons - began more than 100 days ago and is over compensation and health benefits issues. There are have been a couple of aborted attempts at negotiations, but no progress has been achieved on either side…which analysts have said helps the chains in the long run. In the short-term, of course, it is estimated the chains have lost $1 billion in sales.

    By getting involved, the AFL-CIO hopes to bring some solidarity to the seven UFCW locals in Southern California that reportedly have been at loggerheads over some issues. It also hopes to create some momentum that will be on labor's side in other negotiations around the country.
    KC's View:
    We can't help but feel that time is running out and the pressure is increasing for the unions. The UFCW's members have been going without paychecks for too long, temporary health insurance is too expensive, and the specter of upcoming labor negotiations can be seen on the horizon.

    Beyond that, you can just tell the unions are getting a little nuts. They got upset yesterday about an ad that Safeway ran in California newspapers recognizing the legacy of Dr. Martin Luther King, Jr., saying that a grocery chain had no right to celebrate Dr. King's achievements at a time when it is oppressing employees.

    Well, we hate to side with Safeway, a company that we've been fairly critical of on a number of issues. But here's an advisory to the union - organized labor doesn't have sole rights to the message of equality that Dr. King preached. And to turn his legacy into a negotiating tactic seems, well, tacky.

    Published on: January 20, 2004

    Ahold announced yesterday that it plans to divest 204 convenience stores owned by its Tops Markets subsidiary as part of its plan to sell off non-core businesses in the wake of its billion-dollar accounting scandal.

    The stores are operated under several banners: 127 as Wilson Farms Neighborhood Food Stores, 67 as Sugarcreek Stores, and 10 as Tops Xpress units. There are about 2,100 people employed by Tops in its c-store division.

    No time frame has been established for the sale, though it can be assumed that "ASAP" might be Ahold's preference. A likely price tag was not announced.
    KC's View:
    This has been the subject of some speculation, so the c-store sell-off isn’t a huge surprise.

    You have to wonder, though, what else Ahold might be planning to sell.

    Published on: January 20, 2004

    Gary Hawkins is one of the nation's leading experts in customer-centric marketing, both as the CEO of Green Hills, an upstate New York supermarket, and as an in-demand consultant who helps other retailers create strategies and programs that are customer-focused and business-building.

    Hawkins' new book, Customer Intelligence, explores how the world of so-called loyalty marketing has changed and evolved since his Building The Customer Specific Retail Enterprise, written back in 1999.

    While customer relationship marketing has become a popular strategy for retailers of all stripes, it hardly is a concept without detractors. Just last week, a Colorado legislator called for a law that would ban retailer discount cards, And there are plenty of privacy advocates out there who attack the notion of loyalty marketing practically on a daily basis.

    To examine this still-evolving trend in retailer-customer relationships, we conducted an exclusive e-interview with Hawkins.

    MNB: In your judgment, how have things changed since you wrote “Building The Customer Specific Retail Enterprise”?

    Gary Hawkins: I believe we’ve seen changes on several fronts. The first would be that we are seeing more retail companies, in an increasing number of different channels around the world, capturing customer information. Next, we are finally seeing retail companies put the technologies in place to begin communicating and delivering true customer-specific information, deals, rewards, and recognition. Technology is rapidly enabling mass-retailers to go to market on a One-to-One basis. Another change I’m seeing is that more and more consumers are beginning to expect that differentiation; more consumers understand that if they are giving a large share of their (channel) purchases to a given retailer, that they should be recognized – and rewarded – as such.

    What has not changed is the vast number of retail companies who collect customer information and do not realize the value of this untapped asset, letting it sit underutilized in some corner of their organization. It is perhaps the culture change required to move from being product-driven to customer-focused that scares many companies into inactivity.

    The other inhibiting factor to the success of CRM initiatives is the economic structure of the food retailing industry. Retail companies, particularly larger companies, are hooked on the drug of trade monies (slotting fees, ad placement fees, display fees, etc.); many companies make their profit from such monies. This financial force alone provides powerful incentive for retail organizations to continue their backward (product) facing stance, rather than explore the opportunity afforded by a true customer focus.

    What retail companies fail to realize is that their “addiction” is slowly killing them. The manufacturers themselves are beginning to realize that such trade monies are bringing lower and lower return. Leading CPG companies are waking up to the fact that price promoting branded goods actually destroys brand equity over time and results in promiscuous customers, moving from deal to deal.

    MNB: It was interesting that at the recent GEMCON conference, when the audience was polled about CRM, there seemed to be a general feeling that CRM people within retailing companies weren’t talking to category management people – which, of course, is a fatal flaw in any CRM initiative. Do you find this to be true? And if so, what are some practical ways in which retailers can break down these particular silos?

    Gary Hawkins: The failure to integrate the understanding and use of customer information throughout a company’s operations is widespread. I am constantly amazed by the number of people outside the marketing department or loyalty group (where the data usually resides) who have no idea as to the breadth of information available. CRM people and category management people come from two different worlds: the customer and the product. What makes this integration even more difficult is the ingrained practice of tying financial incentives for category management people solely to product-based measures; this creates an environment in which the category people see no need to bother themselves with customer information.

    A powerful way to begin breaking down the silos is to incorporate customer measures into the company’s management and financial reporting. This puts the information in front of everyone and provides the scorecard for all to see, quickly driving home the importance of customer-based measures.

    To help integrate the understanding and use of customer information throughout the company we’ve developed a process that moves along three dimensions. The first dimension is based upon customer knowledge; companies typically starting with an understanding of their Best Customers, that giving way to Customer Tier Management (in which we regularly measure the customer “inventory”), and eventually One-to-One. The next dimension flows through a company’s operations, step by step integrating customer metrics into management and financial reporting, into marketing and advertising, merchandising, operations, and even impacting on the organizational structure.

    Lastly, at each of these steps, customer information should be distributed for use throughout the entire company, from the head office to regional or division offices and down to the individual store level (even to the department or category level).Time and again the most important factor that we see determining the level of success retailers have relative to their customer initiatives is the understanding and commitment of their CEOs and top management teams. To fully realize the gains from a true customer focused strategy requires going to market differently and having the discipline to redirect some portion of past marketing expenditures.

    MNB: How do you respond to the fact that since many retailers are trying to compete with Wal-Mart – which doesn’t have any sort of loyalty marketing program – many of them believe that having such a program is unnecessary? (At the very least, many seem to feel – and you reference this in your book – that to spend money on these kinds of programs is an unwise use of funds at a time when efficiency and low cost/low price is the prime objective.)

    Gary Hawkins: If a retail company is simply going to add some type of loyalty marketing or CRM program on top of everything else they’ve always done without fundamentally changing some of their practices then I agree such an effort would be a waste. For those companies that feel they must try and compete with Wal-Mart on price, a loyalty program is an unwise spend…but, I have yet to see a retail company able to beat Wal-Mart at their own game.

    We are (finally) beginning to see more retail companies understand that developing customer knowledge, and combining it with an ability to use that knowledge in going to market, represents an alternative business strategy that can be used to successfully compete with EDLP operators. I believe that if more retailers understood the true economics of their businesses relative to customers, that they would quickly shift their strategy.

    The examples used in Customer Intelligence begin to clearly show that a significant portion of the typical retailer’s customer base is actually underwater; i.e., a large number of customers generate margins less than needed to support operations. What this effectively means is that the top shoppers are generating not only enough profit to makes themselves profitable to the store but they are also actually subsidizing lower spending (or deal-seeking) customers; it’s as if a good customer is helping pay their neighbor’s grocery bill. If we consider this for just a moment we quickly realize that this means a store’s most valuable customers are actually paying more than they should. And yet retailer after retailer wonders how to compete with Wal-Mart.

    MNB: We’ve probably spent $150 a week in the same grocery store every week for the last 15 years...which, if our math is correct, means that we’ve spent roughly $115,000 in this single store, and yet we’ve never seen anything remotely close to a “reward”...except for the fact that we really like the store, the products and the prices. Can a good CRM program compensate for a mediocre in-store experience? And in your store, how do you strike that balance?

    Gary Hawkins: No, CRM programs – no matter how good – cannot overcome poor product quality, poor service or uncompetitive pricing. As I discuss in Customer Intelligence, simply surviving in the retail game today requires doing a great many things well.

    Given that a retailer is delivering on the basics, a CRM initiative can provide strategic differentiation in the marketplace, and provide powerful new measures by which to manage the business. For example, in addition to viewing sales and margins by product departments, world-class companies now view their profitability by customer tier. Such companies also monitor their customer retention rates, in some cases incorporating such information into their weekly management reports.

    At Green Hills, we realized long ago that we could not compete solely on price. We continue to try and develop our niche, based on great service, a friendly shopping environment, community involvement, and a focus on high quality products, and an expanding selection of specialty, natural/organic, and international foods. We use our CRM program and customer information to reinforce all of this. For example, we were approached by a local school that had run into severe financial difficulties a few months ago for a donation. We created a program, run through our loyalty card, which allowed the families of the school to earn a “rebate”, based upon their spending over time that we donated to the school. The program raised over $12,000 for the school. We continuously seek to link our CRM initiatives into everything possible that we do.

    MNB: How do you think Generation Y perceives the whole CRM/loyalty marketing issue? Is it important to them or not? And how does the dot-com revolution affect the development of these initiatives?

    Gary Hawkins: No matter the age group, ethnicity, or culture, personal recognition is one of the most powerful emotional factors, universally valued by people around the world. Who doesn’t like to feel important, or made to feel like they’re special? Too many retailers focus only on the economics or financial rewards when it comes to CRM or loyalty initiatives. While these monetary awards or values are important, and are certainly a necessary part of such programs, they are only a part. Many retailers miss a significant opportunity to solidify the shopping of their most regular customers simply by recognizing them in some way as “best shoppers”.

    Store managers for M&M Meat Shops in Canada each Valentine’s Day deliver a bouquet of roses and a box of candy to their top customers at their home. At the holiday time they send personally signed cards to their top customers. Rice Epicurean Markets store managers deliver beautiful gift baskets to the door of their best customers during the Holiday season. Customers of Green Hills are recognized with free Christmas trees as part of the Thanksgiving turkey program each year. Efforts such as these create tremendous word of mouth amongst consumers and do much more to solidify customer relationships than only giving a special price on some product.

    Relative to the dot-com revolution, my comments would be that, prior to the bottom dropping out, we saw an explosion of new technologies and tools coming to market. The problem was that much of this was vapor-ware. We are finally recovering from that and are seeing new innovative technologies and solutions coming to market that are proven and ready for business.

    MNB: And finally, we continue to believe that the biggest problem that most food retailers isn’t trying to figure out how to make consumers loyal to them, but how to prove their loyalty to consumers. Would you agree? And how does your store achieve this goal?

    Gary Hawkins: I would reframe the issue in this sense: rather than thinking in terms of which way “loyalty” should flow, the relationship between the customer and the retailer must be win-win. The customer must receive value from the retailer to continue shopping (remember, value can mean many things, not just low price!) and the retailer must make a profit from the interaction so as to remain in business. The reality is that it is impossible for a retail company to be – and offer – all things to all consumers.

    Every retail company has finite resources that can be expended for operations or marketing. At the same time it is apparent that there is a certain portion of the consumer base that are deal-seekers; consumers that will go store to store simply seeking the deals, in turn creating a money losing relationship for the store. It follows then that the company should direct their resources to those activities (customers) who provide a positive return on investment. Of course, I’m speaking primarily of economics here; there are a large number of successful retailers who have built a customer-focused culture that provide exceptional levels of service to their patrons, in turn helping to ensure loyalty.

    I absolutely agree that a retailer should work to prove their loyalty to their customers, but to do so with eyes wide open as to the economic equation. The bottom line is that there continues to exist for most retail companies a substantial opportunity that can be realized by focusing on those people who are already amongst their best customers. Time and again I see that such customers have even more shopping that can be directed to the retailer, and will be, if the customer is properly recognized.

    By continually reinforcing our relationship with our regular shoppers at Green Hills through extending special prices, special services, exclusive events, and yes, even simply recognizing the customer by name when they’re in the store shopping, we work to achieve that win-win relationship.
    KC's View:
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